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Smaller, Independent Cable to FCC: Put Consumers First

Blatant Discrimination Against Independent Cable Harms Consumers and the Public Interest

PITTSBURGH, February 12, 2008 – In comments filed with the Federal Communications Commission (FCC) today, the American Cable Association (ACA) urged the Commission to address blatant price and program-tying discrimination from the broadcast and programming conglomerates against consumers and smaller, independent cable operators by making moderate changes to the FCC’s retransmission consent and program access regulations.

ACA’s comments were submitted to the FCC as part of the Commission’s current review of retransmission consent and programming tying arrangements. ACA represents 1,100 independent cable operators serving more than 7 million consumers in smaller and rural markets throughout all 50 states.

ACA’s comments provide the FCC with hard evidence that demonstrates how current programming and retransmission consent practices cause significant harm to the public interest in markets served by small and medium-sized cable providers through reduced programming choice, higher prices for consumers, and reduced video competition. For example, broadcasters charge smaller cable operators retransmission consent fees as much as twenty times more than what the largest distributors pay. This price discrimination forces operators to take investment away from broadband deployment to instead line the pockets of big broadcasters and programmers.

Today’s ACA filing illustrates that if the FCC were to employ moderate adjustments to regulations relating to current wholesale programming and retransmission consent practices, ACA members could provide greater value through broadband services and localized programming and decrease the cost burdens passed on to consumers as a result of programmer and broadcaster demands

“The ability of consumers in smaller markets and rural areas to realize the full promise of the Information Age through broadband access is impeded when independent cable operators are forced to pay disproportionately higher fees levied by broadcasters and programmers,” said Matthew M. Polka, ACA president and chief executive officer. “When the FCC amends current regulations to prohibit programmers and broadcasters from discriminating against independent cable operators, then independent cable will be able to invest in and deploy new broadband services and applications, connecting these underserved areas to the lobal marketplace and giving their customers more video choices.”

In support of the ACA’s position on retransmission consent, William P. Rogerson, former FCC chief economist and professor of economics at Northwestern University, submitted a report on the economic effects of price discrimination in retransmission consent agreements. Dr.Rogerson finds no economic rationale or discernable public policy support for the price discrimination against smaller cable distributors; rather, the lack of negotiating strength and bargaining power of the small and medium-sized cable operator is exploited by broadcasters abusing their government-granted ability to unfairly demand higher prices.

“There is considerable evidence that broadcasters do, in fact, engage in extensive amounts of price discrimination,” states Dr. Rogerson in his filing. “The main economic cause of price discrimination in retransmission consent agreements is simply that small and medium-sized cable operators are in a considerably worse bargaining position than their larger brethren.” Dr. Rogerson concludes, “I think that the Commission should carefully consider whether adjustments to regulations that would spread this burden more equally across all MVPD subscribers would be more consistent with the Commission’s public policy objectives.”

Today’s ACA filing provides additional evidence that current programming and retransmission consent practices cause significant harm to the public interest in markets served by small and medium-sized, independent cable providers. ACA’s original comments, filed with the FCC on January 4, 2008, request adjustments to program access and retransmission consent regulations, including the following:

In addition to any bundling arrangements, obligating programmers and broadcasters to offer channels on a standalone basis on reasonable rates, terms and conditions;

Prohibiting programmers and broadcasters from mandating channel carriage on a specific tier or to a required percentage of subscribers;

Prohibiting price discrimination against small and medium-sized cable companies unless the differences are truly cost-based; and,

Adjusting the program access and retransmission consent complaint processes to provide for meaningful relief, including continued carriage of a channel while a complaint is pending.

“Our members are truly community providers committed to delivering the broadband services and programming that meet the needs of the customers we serve. But instead of doing that, we are forced to pass on the burdens of higher costs and reduced programming choices resulting from price discrimination, current government regulation and wholesale retransmission consent and programming practices,” explained Polka. “ACA has provided the FCC today with reasonable suggestions, within its authority, that will free our members and their customers from the discrimination of current broadcast and programming practices and allow them to get back into the business of connecting our communities to a broadband future.”

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About the American Cable AssociationBased in Pittsburgh, the American Cable Association is a national association of small, locally-based cable TV companies providing advanced broadband services primarily in rural markets. The Association represents smaller and medium-sized independent cable businesses through active participation in the regulatory and legislative process in Washington, D.C. ACA’s nearly 1,100 member companies serve more than 7 million subscribers in all 50 states. For more information, visit www.americancable.org.

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